Maine’s taxing tax problem

My wife certainly did. Roughly $100 that had previously been in my paycheck was now missing. That money was probably going to buy groceries but had mysteriously vanished.

I say mysteriously because we were told by the president during his re-election campaign that his quest for raising more tax revenue was only aimed at those greedy, horrible, über-wealthy members of America’s financial aristocracy. Certainly not the struggling middle-class.

But there it was, a smaller paycheck for me before the president was even inaugurated into his second term of office, and I can tell you that I don’t make anywhere near the arbitrary line of wealth that was drawn in the fiscal cliff deal, above which you were fair game for more confiscatory taxes.

Hey, don’t blame me. I voted for Romney.

Regardless, as I looked at my paycheck it occurred to me that we are so obsessed with talking about and debating the federal share of the withholdings in our salaries, that we completely miss what the state does.

In Maine, for instance, there are a number of facts about what you pay in taxes that you probably aren’t aware of.

Maine, for instance, has a top marginal tax rate — which was 8.5 percent until recently — that is among the highest in the nation.

So what, you ask? Who cares what the beautiful people on the coast in their mansions and private islands pay in tax?

Well you may be surprised to learn that this top-income tax bracket kicks in at a whopping $19,500 a year for individuals and $39,000 for couples. In other words, when I tended bar in college, I was paying the top-income tax rate available.

In states like New York or New Jersey, just as a comparison, the top income tax rate kicks in at half a million dollars.

How does it feel to be in Maine’s upper-crust?

Even with the LePage tax cut (which just became implemented in January), the supposed “progressivity” of the tax code remains the same, just with a slightly lower rate of 7.95 percent.

Speaking of that, were you even aware of when the new tax rates were taking effect? Were you aware there was a tax cut enacted in the first place? From what I have heard from Republican operatives around the state who polled on this, the level of awareness was virtually non-existent.

Everyone always talks about neighboring New Hampshire as an anti-tax paradise, but what about the residents of the colloquially named “Taxachusetts”? Are you aware that, while people making less than $20,000 are paying roughly 8 percent in taxes in Maine, residents of the Bay State are paying a 5.3-percent flat tax?

The real point here is that, even despite the Republican reforms of the last two years to Maine’s tax system, the system itself is still tragically broken. It is too high, and the income distribution is ridiculous.

While we sit here and agonize over the federal tax rate, and get justifiably irritated by the debate over those rates and subsequent changes to them, it is important to remember that they are not the only taxes that we are subject to.

It is well past time that Maine seriously consider what kind of system it wants to have, how fairly it is apportioned and the overall burden it puts on Maine’s citizens.

The overall goal should be the implementation of a fair and simple system that provides for the financial needs of the state of Maine, while creating an environment that makes it easy to live and work in the state.

Gov. LePage has made clear that his long-term agenda is the elimination of the income tax altogether, though now with the Democratic takeover of the legislature that seems like an impossibility.

But regardless of your political affiliation, I think we can probably all agree the current system fails that test.

It is time we all understood that and faced that reality and dealt with it.

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About Matthew Gagnon

Matthew Gagnon, of Yarmouth, is the Chief Executive Officer of the Maine Heritage Policy Center, a free market policy think tank based in Portland. Prior to Maine Heritage, he served as a senior strategist for the Republican Governors Association in Washington, D.C. Originally from Hampden, he has been involved with Maine politics for more than a decade.
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Matthew Gagnon

Matthew Gagnon, of Yarmouth, is the Chief Executive Officer of the Maine Heritage Policy Center, a free market policy think tank based in Portland. Prior to Maine Heritage, he served as a senior strategist for the Republican Governors Association in Washington, D.C. Originally from Hampden, he has been involved with Maine politics for more than a decade.